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CNN LARRY KING LIVE

Presidential Race Fact Check; Congressional Leaders Meet With Fed Chairman, Treasury Secretary

Aired September 18, 2008 - 21:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEO CLIP)
LARRY KING, CNN ANCHOR: Tonight, truths and lies. With so much at stake, won't somebody set us straight? Is Barack Obama really going to raise your taxes? Is this actually Sarah Palin? Has she always rejected the bridge to nowhere?

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: Thanks, but no thanks.

KING: And John McCain. He condemns the D.C. crowd, but isn't he one of them? What and who should we believe?

Plus, what's with our money. Is it safe or not? As the economy careens out of control, let's get a grip. Suze Orman is here, back by popular demand and yes, taking your calls.

Plus just in, breaking news of Capitol Hill. Have power players solved the economic crisis? So don't jump. Don't despair and don't go anywhere. This is all next on LARRY KING LIVE.

(END VIDEO CLIP)

KING: Good evening. We begin with breaking financial news tonight, an extraordinary meeting has just concluded. Congressional leaders have met with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. CNN senior business correspondent Ali Velshi is with us. Ali, what can you tell about their meeting and what they have come up with?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: It's a remarkable gathering. As you said, Ben Bernanke, Henry Paulson. After spending the day with the president, Henry Paulson went over to Congress. They met in Nancy Pelosi's office and they seemed to have agreed they're going to sit around for a few days if they have to try to hammer out one deal that will try and deal with this ongoing domino of financial crises that we've been seeing. They want one deal. They want to look at this mess and say what can we do?

And he's got them all talking. The idea here is that maybe something, Larry, that is reminiscent of the deal that came out after the long- term crisis where there was an agency formed, a government body formed, that bought up a lot of the bad properties, held on them for a few years, cleaned them up and sold them at a profit.

The idea is maybe the government can take over all of this bad debt and somehow deal with it over the course of a few years. That's the thing. But Larry, we are talking about a deal could be worth more than a trillion dollars. There's a lot of bad money out there right now.

KING: Are you saying these meetings will be ongoing?

VELSHI: We understand that they're prepared to meet through the weekend. As you know, the last several weekends have been working weekends for Henry Paulson, cutting deals for Merrill Lynch and Fannie and Freddie and things like that. They're prepared to go through the weekend and try and hammer out a deal. Congress and Nancy Pelosi has said they will sit beyond their September 26th date where Congress would normally get out of session. They're prepared to do this. This would have to be a legislative solution.

KING: Ali, thank you so much. Ali Velshi, CNN senior business correspondent, as always, right atop the scene.

Now let's bring in Suze Orman, host of her own "Suze Orman Show," personal finance expert. What do you make of this, Suze? Good idea?

SUZE ORMAN, PERSONAL FINANCE EXPERT: Well, actually, I think it's a good idea and here's the real question -- what took you so long? Truthfully, why did we have to get to this point for them to create something like an RTC, a resolution trust. This is the solution to come up with months ago when everybody knew that these loans were going to go down. They should have done it. So once again, I'm saying to you why does it take them so long to come up with the solution that they should have come up with a long time ago? But I'm grateful they're coming up with it now.

KING: The market rebounded today. Good sign?

ORMAN: Great sign, but for today. Not for necessarily the long run. Don't get suckered in just because this market goes up today. Maybe even tomorrow. Doesn't mean that we're out of the woods. How many times in the past have we seen the market go up 300, 400 points and then all the way down again?

We still have serious trouble on the horizon so until it's been settled, until things have cleared out, until unemployment starts to go down again and until they figure out how to secure these mortgages and get money into the system, we have trouble, Larry. This is the beginning of the solution to the problems.

KING: Republicans on the Hill today are blasting the Treasury Department and Federal Reserve for orchestrating that $85 billion bailout of AIG. What do you think of that?

ORMAN: Well, I think that's a great thing for them to yell about. Of course we had to do that. What is the matter with them? Don't they understand -- I get that the taxpayers are going to have to pay for it but do you have any idea -- do they have idea what would have happened if that institution had gone down?

That was a massive institution within 130 countries with about 113,000 employees in every aspect all over the world. So I don't know, I'm personally grateful that they bailed them out. And it is not a bailout. It was a deal, by the way. The government is going to make a serious sum of money on that. The taxpayers will in the end make money -- 80 percent of this company, for $85 billion? One of the biggest -- the biggest insurance company out there. Again, I have to say, that was one of the best business deals I've ever seen in my life.

KING: The New York attorney general Andrew Cuomo has opened an investigation into short selling and possible spread of false information. That investigation announcement drove down the stock price of several Wall Street firms including Goldman Sachs and Lehman and Morgan Stanley and AIG. By the way, the investigation is of investors and not employees. What do you think of that?

ORMAN: Well, here's what I really make of it. Did you see in London, they have shut down short selling altogether? Currently, you can now not short sell and there is a rumor by "The Wall Street Journal" right now that Cox is going to shut it down here in the United States, as well.

Something is not right with the short selling. I don't know what it is. But when you can take down companies and you can see their stock lose 50 percent, in just a week or so, and go -- or even a day sometimes, something is radically wrong. This is not normal short selling. Why they got rid of the uptick rule a few years ago is beyond me. But it really, I think, goes beyond the uptick rule and they seem to be taking very desperate measures right now because something is wrong with the shorts that are out there.

KING: McCain wants Cox fired, doesn't he?

ORMAN: Oh, he most certainly does. That was one of the things he said. I have to tell you, I don't agree with him with a lot but that's one idea, hmm, maybe he has an idea there. Why in the world he didn't come in and regulate more, I mean, why he didn't take action sooner and bring in certain things a long time ago is, again, beyond me. But it's better to do something now than to continue to have done absolutely nothing.

KING: We have an e-mail from Matt in Eugene, Oregon. "Why are my tax dollars being used to bail out companies that through bad business practices have gotten themselves into a mess?"

ORMAN: Because nobody else has any money to bail anybody else out. Listen, watch what's happening here very closely. You want to keep your money safe and sound now. You're putting it into our Treasury, because the Treasury is backed by the taxing authority of the United States government.

What's a three bill treasury paying you right now? Nothing, like a quarter of a percent. Nothing. So we are lending our money to the government in essence to keep it safe and sound. Just so that nothing happens to it at a 0 percent interest rate now so that they can use it to bail out everybody and hopefully make money. It's the only place that has money. You can't get money anywhere else so I have to say, it falls on us but it's always fallen on the taxpayer. This isn't something new.

KING: Hold the phone. Suze will be back right after the break.

(COMMERCIAL BREAK)

KING: We're back with Suze Orman. Another e-mail question from Tamara in Montreal. "When it comes to savings accounts, I know that funds are protected up to $100,000. However, I hear that the FDIC may be starting to have troubles of their own. Do you think we have to start worrying about this and what do we do if the insurance can't be provided?

ORMAN: Yeah, here's what you need to understand. I have personally spoken to Sheila Bair, the chairman of the FDIC. I have it in writing. Here's how the FDIC really works. If they, God forbid, ran out of money, they have a line of credit so to speak with the Treasury. They are backed by their charter by the full faith of the United States government. So they cannot go belly up.

Now, of course, what does that mean? The taxpayers, again, eventually if they had to go that route, but at this point, hopefully they have enough. She feels that they absolutely have enough for everything that she sees on the radar and they're behind the scenes looking at it. But in case they don't, they'll go to the Treasury. They have a line there and they will get the money needed to make sure that your money is absolutely safe.

KING: Let's take a call for Suze. Santa Fe, New Mexico, hello. Hello?

CALLER: Hello?

KING: Yes. Go ahead. Go ahead.

CALLER: OK, hi. Hi, Suze. I have a question. My question is that I have a relative that put a CD in for me and I cannot touch it for nine years and they refuse to take it out for me and I need the money now. Is there any way to go around this to get the CD out?

ORMAN: No. Whose name is the CD in?

KING: I don't know. I cut the phone.

ORMAN: Yeah, all right, fine. There you go. But if it's not in her name, she has no right to the money so there you go. I'd rather have money in nine years than not at all. I don't know.

KING: We have an e-mail from Burnville, Pennsylvania. It's from Michael. "Shouldn't we be buying right now? I was always told buy low, sell high. Does that mean put more money into my 401(k), even though I've been losing money on it for 14 months?"

ORMAN: All right. Let's go over this one more time. Here are the rules. You have 10, 20, 30 years until you need your money, you have got to keep investing in your 401(k). This is not the time that you sell. You keep investing every single month. Just make sure you're investing in good, quality. Either mutual funds, exchange traded funds, whatever it is.

However, if you happen to be somebody who is retiring in six months and you need this money to be safe and sound, maybe to generate income for you, whatever that is, this isn't the time that you take a risk. This is the time that you never should have been in the stock market to begin with, that you need to be in safe things to generate income.

Larry, here's the thing also that people should think about doing. At times like this, if you are afraid and you don't know what to do, there's nothing wrong with switching your investments, meaning, you can come out of the stock market but buy things, stay in the stock market, that give you good dividend yields. Exchange traded funds that are paying you 4 percent, 5 percent, 6 percent. You have nothing to lose.

So if the markets continue to go down, at least you're getting income so you're not so freaked. Otherwise the money is sitting there making half a percent, maybe one or 2 percent in money market funds. So there's always a way to invest.

For those of you however who are afraid, you don't know what's happening, I don't know. Today was a very nice up day, you might want to lighten up a little bit if you need that money. If you don't need it, now's a great time. But don't do in it a lump sum, little chunks. If you have $50,000, now is not the time to be investing. If you're in your 401(k), little every month, OK, I don't have a problem with that.

KING: Chicago, hello.

CALLER: Hi. Suze, explain to us dollar for dollar how much this is going to cost the taxpayer. Why are we bailing them out? How much does it cost me as an individual?

ORMAN: I wish I could tell you that. Currently, we're on the hook for about $900 billion. If they go ahead with this new resolution trust, this RTC, or whatever it's going to be, it's got to be a little bit different than it was 1989. It can't work the same way. It is a very different problem.

But if they go ahead with doing this, this could be close to $1 trillion more. Now, what -- how that translates into taxes, I'm not exactly sure. Because how do they set up it up? Do they set it up so that eventually when they sell it, they make money and then we don't have to get taxed for it? I don't know how this is going to work out and they don't know how it's going to work out either. At least I'm willing to say, I don't know. I wish they would, you know.

KING: We have an e-mail of Deborah in Duncan, South Carolina. "We have our mortgage with Washington Mutual. There's talk of bankruptcy."

ORMAN: Yes. KING: "Well there be a time that they would be willing to accept a payoff lower than what we owe? We have excellent credit. We owe $77,000."

ORMAN: I don't think so because when you have excellent credit, they know you don't want to ruin your credit and they need your money. They need your monthly payments.

So at this point, they're not going to be willing to take less than that. They're usually only willing to take less when you have lousy credit and they'd rather get $50,000 than nothing. But when you have great credit, they want all the money.

KING: Are you optimistic Suze or pessimistic?

ORMAN: Well, I've been pessimistic as you know lately. I was optimistic after Bear Stearns. I was getting optimistic. I was thinking it wasn't so bad until then we had Fannie Mae, Freddie Mac. I'll feel better once there really is a decision to do we do something like an RTC, a resolution trust.

Are they taking care of the situations? Are they taking care of the short sales? Are they really dealing with the problems in an intelligent way? Have they been doing that up until now? Not exactly. If they could do that, I'd get a little bit more optimistic. But other than that, to say that this is serious - I said it the other night, I'm going to continue to say it. This is serious, everybody. This is serious.

KING: Thanks, Suze. We'll be calling on you again. I wouldn't be surprised if it's very, very soon. Suze Orman, host of "The Suze Orman Show."

Is the public getting tired of Sarah Palin? Now, that's an interesting question. Some answers, next.

(COMMERCIAL BREAK)

KING: We're back. We now welcome to LARRY KING LIVE Jamal - all in Washington, by the way. Jamal Simmons, communications adviser to the DNC and a supporter of Barack Obama. Our own John King, CNN's chief national correspondent. And Kevin Madden, Republican strategist, former senior adviser to Mitt Romney and now a supporter of John McCain.

John, let's kick this off with before we run down some states in a little while, who's leading at this point? Popular vote, electoral vote?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, if you look at the national polls, Larry, we do see a change. We have Obama on top right now. The latest CNN poll has Obama at 47 percent and John McCain at 44 percent, 9 percent undecided as you see here behind me. Now that's statistically insignificant. Statistically, that's a dead heat.

But it's significant to this degree. Last week, McCain was running ahead in most of the national polls by a point or two. So it is clear that the McCain/Palin post-convention honeymoon is over and a campaign that 10 days ago was based on the personalities and the character traits of the candidates is now focused on the huge issue you were just discussing with Ali Velshi and Suze Orman.

This is a big issue. It has stopped the campaign and it has changed what the campaign is about. And at the moment, Obama seems to be benefiting a little bit from that, Larry.

If you look at an electoral map - I don't know if you can put it up behind me on the wall really quickly. That's still very close. Again, advantage Obama. We have him right, if you look at this now, about 233 electoral votes leaning his way. About 150 of those safe. McCain at 189. So that's advantage Obama. Seven weeks to go though, still a lot of business to do there, Larry.

KING: Long time. We'll be coming back to you in a moment, John. Jamal, the polls seem to indicate that Sarah Palin's excitement factor is leveling off. Do you buy that?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: You know Larry, I thought from the very beginning - we talked about this a little bit when we were at the Republican Convention a couple of weeks ago.

This is a little bit like -- Republicans are like little kids sucking on Pixie Sticks. They all had a sugar high. They were running so excited about this candidacy and now they've come down to the crash.

People are starting to realize, OK, maybe we like Sarah Palin but let's talk to her a little bit more. Let's find out what her issues and her ideas are. And the big problem is, the McCain/Palin ticket is turning into a typical Republican ticket because there's so many things that they've told us about Sarah Palin and about the candidacy and McCain's positions that we thought were true and then the next day we find out well maybe they're not as true as we thought.

She said she went to Ireland, really she's had a refueling stop. She said that she went to Iraq, really, she just went to, you know a border. They said that she was checked out by the FBI. The FBI said, no, they never checked her out. And so many things that people have a lot of questions about that we're going to have to find out.

KING: Kevin, Senator Chuck Hagel, the biggest named Republican so far to question Governor Palin, said today that she doesn't have any foreign policy credentials. Is that adding to the loss of luster?

KEVIN MADDEN, GOP STRATEGIST: Well, look. I think if the primary or the election were up to Senator Hagel, maybe Sarah Palin wouldn't be able to convince Senator Hagel that she was the right vice president.

But it is not up to Senator Hagel. It's up to the American public and I think what you have seen over the last few weeks and you're going to continue to see over the next 47 days is the McCain campaign go out there and make a case for Sarah Palin and her experience based on her accomplishments. Somebody with the chief executive experience, somebody with experience on energy issues. Somebody who is known to the people of Alaska and will become known to many people around the country as a maverick, as somebody's who's a reformer, somebody to challenge the status quo in Washington at a time where Washington is at its lowest poll ratings.

Somebody like Sarah Palin and -- a ticket like John McCain and Sarah Palin are going to be a very formidable force to voters when they're making their choice.

KING: Let's swing through some states. John, take a look at Florida. What does Florida look like tonight?

J. KING: This one's kind of interesting, Larry. If you look at the two-way race, you see it right there behind me, McCain 48, Obama 48. That's as close as you can get.

And I just flew back from Florida a short time ago and the level of activity down there at seven weeks out is astounding because it is so close. Both campaigns trying to reach into the other guy's base of viewers if you will. The Jewish vote, even though it's a small vote, in southern Florida is going to be huge and potentially decisive in this election.

But let's look at something interesting here and go to the ballot. When you put the other names on the ballot, when you put Ralph Nader, Bob Barr and Cynthia McKinney on the ballot - it's a little smaller to see on the screen behind me, but if we can come in a little closer on this, Obama stays at 48. You would think conventionally we used to say Ralph Nader hurts the Democrats.

But in this poll at least, those votes are coming away from John McCain. Could be a sign that there are people out there who don't want to vote for Obama and don't necessarily like McCain, but would vote for him in a two-way, but at least are thinking about going a different way with more names on the ballot.

Traditionally at the end, those other candidates, their vote peels off a little bit. But if you're the McCain campaign, that makes you a little bit nervous, Larry, are you watch things heading into the final weeks.

KING: What about Ohio?

J. KING: Ohio is another one, Larry. Republicans need this state and we have it right now at 49 Obama, 47 McCain. Again, that is statistically a dead heat. Some other polls I've seen show McCain up a little bit. It is cliche but true that no Republican has ever won the White House without winning Ohio. It's very hard to do math that gets McCain to 270 electoral votes without this state, which is why the Obama campaign and this is important, they have a lot more money than the McCain campaign and they are pouring money into these states, the red states, where in the past, say, John Kerry four years ago, had to start about now making tough decisions saying, I can't spend as much in Ohio. I need it in Michigan or I need it in Pennsylvania. Obama has the money, so he's going to fight for these states to the very end. This is a state to watch. As this debate turned back to the economy in the last few days, this is a state, those blue collar voters supported Hillary Clinton. You see my hands moving. I'm wishing I had my map behind me, my other map behind me. This is a critical, critical state and the changing dynamic back to the economy here gives Obama an opening in a state that had been starting to trickle back Republican. Very much worth watching.

KING: Jamal, do you think that the financial crisis is aiding your candidate?

SIMMONS: No, I don't think it's aiding anybody in America. Everybody's suffering under this financial crisis. I think that the person who's actually getting hurt, though, is John McCain because, you know, the first day this came out he said that he was against having an AIG bailout. And then the AIG bailout happened and then he had to try to explain why he was for the AIG bailout.

This, again, getting John McCain back to this point about being a typical Republican. People thought they wanted John McCain of 2000. But the John McCain of 2000 who had those guys like John Weaver and Mike Murphy on his team, he doesn't have those guys anymore. Now he's got a Bush team and they're running an incredibly negative campaign. They're saying things are either dishonest or untrue about Barack Obama and people are starting to wonder whether or not John McCain really is the maverick they thought he was.

KING: so Kevin, in a sense, isn't it helping Obama? Original question I asked.

MADDEN: No. You know, Larry, I would disagree with that. I think what this crisis has shown is what we need most in this country right now, who we need in the White House is somebody who can make decisions, somebody who is decisive, somebody who can show confidence in the markets, somebody who can show leadership.

And John McCain, the charge over the next 48 days, again, is to show that he is that person who is not going to hesitate in the time of crisis. He made the charge today which I think was a very compelling message which is that when you're president of the United States, you can't vote present like Barack Obama has so many times on so many critical issues. Instead, it's making decisions, it's moving forward and it's showing the American public that you have the plan and that you are the person to lead this economy forward. And that's where I think this debate is going over the next couple of weeks.

KING: OK. We'll come right back with more. Hold it, we'll come right back. What's the spin inside the Obama and McCain camps? We'll ask our experts and look at a couple more states after the break.

(COMMERCIAL BREAK)

KING: we're back. Which candidate can get us out of our financial crisis? That's tonight's quick vote question. Go to CNN.com/LarryKing. Tell us what you think. Back to John King as we look at another couple states. What about Wisconsin?

J. KING: You want me to give you one that's a blow-out, right, Larry? Well, Wisconsin is not. This is such a remarkable campaign. So many states are so close. Look at Wisconsin, Obama 50, McCain 47. If you are the Obama campaign, you are encouraged because you desperately want to get above the 50-plus one mark in these states. It gives you confidence. It also helps you focus on the other guy's states. Go find Republicans votes or independent votes if you've got your vote around 50 percent.

But this is very close for John McCain. Again, we are statistically within the margin of error. This is a state that went Democrat last time and it's a state that's very complicated. Some blue collar, union areas, but also some rural, more conservative, small town areas that go Republican. A huge battleground state. John McCain is there tomorrow to give a big speech on the issue we're all talking about, the economy.

And so, Larry, again, the economic debate is huge in these heartland states out in the Midwest, all across the country, of course, but the Democrats had hoped to put Wisconsin away by now. They are going to have to fight for it.

KING: Before we ask Jamal and Kevin what they think of these, let's do one more. Indiana, John.

J. KING: This one appears, Larry -- again, I was just there last week, earlier this week, and the Obama campaign is putting a lot of effort into Indiana to register new voters and to try to turn them out. But if you look at this poll, this one appears to be going back to its political DNA. Not since 1964 has Indiana backed the Democrat for president. You see here McCain 51, Obama 45.

By no means should John McCain be comfortable looking at these numbers, because the Obama campaign is trying to rewrite the rules and turn some of these red states blue with a flood of new voters. They're working very hard. The deadline to register people is October 6th. And the Republican secretary of state says he believes the record of new registrations will be shattered this year because of all this activity.

So the McCain camp, this is one place they can feel a little bit more confident, but certainly not over confident, Larry.

KING: Jamal, based on what you have heard about Florida, Ohio, Wisconsin, Indiana from John, does this buoy your chances or disappoint you?

SIMMONS: I'm feeling good, Larry. I'm feeling good. One of the -- I actually like what's happened over the last week or so because there's no way that Barack Obama or any Democrat, frankly, is going to run away this election. Democrats just don't win national elections by more than two, three -- four points is an outside landslide, if we win this by that much.

So it's healthy for the Democratic troops to get a little scared, realize this is going to be a gut -- a big fight and they've got gut it out for the last four or five, six weeks of this campaign. I think that's what happened last week. Democrats clicked in. They started raising money again. They started organizing. Every Democrat that I know around the country is emailing me, trying to find out where they can go volunteer.

So that's actually really helpful. And if you look at the entire board, Democrats are actually pressing John McCain on a lot of states we shouldn't even be that close in. I want to see McCain play defense, too.

KING: Kevin, what is your read?

MADDEN: I know that Jamal's friends are all e-mailing him. And I'm e-mailing him all the time, telling that him he's too optimistic. Look, I think if you look at John's map earlier, that Florida and Indiana are very likely to fall off the map and fall into likely red states that John McCain's going to win. Instead, this is going to be a real battle with issue number one being the economy in places like Michigan and Ohio and Pennsylvania.

Those are states that have been very hard hit by the mortgage crisis. They're states that have been hit hard with their manufacturing sectors. And that's why you see John McCain going to places like Wisconsin, Ohio and other states with very specific messages on what he's going to do to help those economies. And I think that is -- that's where this election's going to turn. And I think that right now that the McCain campaign feels very good about their message in those states.

KING: John King, how close is this going to be?

J. KING: Larry, right now it is as close as I've ever seen one. This is number six for me. Remember, I was just in Florida where we through 2000, and this has the potential. Some think it will break one way or the other after the first debate. That's just a week away. We'll see what happens there.

Kevin and Jamal are talking about an interesting point. It is fascinating to talk to people about the economy when you're in these states, because they're very torn between these two guys. This is why governors tend to win presidential elections. Governors have that hands on experience all the time in the economy. Neither Obama or McCain are known as economic experts. Voters have serious questions about this.

The way several framed it to me this week, Larry, and I find this fascinating is imagine you're taking your 50,000 dollars and you're walking to a broker and you're going to say, where do I invest. Do you want to go with the new guy, who says we're going to do this completely different. You don't know me, but we need to change things. We're going to do it completely different. That has powerful appeal, when people say I don't like what's going on right now. Or do you say, you know what, I want to go with the gray-haired guy. I want to go with somebody who is going to be conservative about this, who has been around for a long time, who is not going to go off and do something rash.

And you see voters literally having a tug of war with themselves. Some people have made up their mind, of course, but the people who are out there, the swing voters in these state that we have circled gold or lighter red or lighter blue, that's the tug of war they're having with themselves. It is a fascinating debate.

KING: A question for each of you. It's the same question. Jamal, give me a key state to look at election night.

SIMMONS: Colorado would be one. If we win Colorado, I think we are in good shape. Looks like we'll do very well out there. You have a lot of voters --

KING: Colorado would be where you look. Where do you look, Kevin?

MADDEN: Ohio, Ohio, Ohio. I'm going to be looking at the Mahoney Valley area of Ohio to see if places like those traditionally Democrat areas, there seems to be more turn out that's going to be helping Barack Obama or John McCain.

KING: And John King, as an observer, reporter, journalist, give me a state you're going to look at?

J. KING: I like both the two gentlemen just mentioned. They're both very smart. Since they picked those two, let me give you this one, the state of Virginia right here in our backyard. Voted red for a long time. The Obama people trying. They can get a lot more votes in northern Virginia, but one of the key questions in the valley Kevin was just talking about out in rural Colorado, will rural white Democrats vote for the first African-American candidate for president from the Democratic party? That will be decided out in the hills of Virginia as well. And it's in the east coast time zone, so we will see it early on, Larry.

It doesn't necessarily mean it will apply across the country, but it's a very interesting thing to watch, right along the North Carolina/Tennessee border out there in Virginia. Watch out there.

KING: Excellent discussion. Thanks. Jamal Simmons, John King, Kevin Madden. Tell the truth! Why can't our politicians stick to facts? That's next.

(COMMERCIAL BREAK)

KING: Program reminder. Next Wednesday night, Bill Clinton, former president of the United States, will be our special guest.

It's time now to do some fact checking. In Washington, D.C., Bay Buchanan, president of the American Cause. She's a conservative activist. In Washington, as well, Viveca Novak, deputy director of FactCheck.org. And in Montana, Ed Schultz, the radio talk show host, who is supporting Obama for president. Quickly, Viveca, what is FactCheck.org. VIVECA NOVAK, FACTCHECK: FactCheck.org is a part of the Annenberg Public Policy Center at the University of Pennsylvania. And we see ourselves as part of a consumer advocate for voters. We are there to point out what's factually wrong in candidate ads and speeches and debates and we're pretty busy lately.

KING: No endorsing, right?

NOVAK: No endorsing. We are totally nonpartisan.

KING: We'll show you some clips. We'll have Bay and Ed comment, Viveca, as well. Here's our first one. McCain is hitting Obama, saying he'll just raise your taxes. Let's watch this ad.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When our economy's in crisis, a big government casts a big shadow on us all. Obama and his liberal Congressional allies want a massive government, billions in spending increase, wasteful pork. And we would pay painful income taxes, sky rocketing taxes on life savings, electricity and home heating oil. Can your family afford that?

(END VIDEO CLIP)

KING: Ed Schultz, truth or not?

ED SCHULTZ, RADIO TALK SHOW HOST: No, that's not true, Larry. It depends on who you're talking about. If you're talking about the top two percent, absolutely, taxes are going to be going up for a fraction of the population in this country; 95 percent of Americans under Barack Obama's plan will get a tax break and a tax reduction, along with energy tax credits which John McCain voted against recently with wind and solar. There's a totally different philosophy here as to who gets the break.

KING: OK. Bay, you want to respond?

BAY BUCHANAN, REPUBLICAN STRATEGIST: Sure I did. I think, as he said, it was Obama and his liberal cronies back in Washington. And the key here is that Barack Obama, 94 different times, has either voted to increase taxes or keep taxes from being cut. He has a complete, absolute perfect record for keeping taxes high. That's his game plan. Always has been. He's come up with this new plan now as a candidate. But you look what the liberals do, all that spending they want to do, you have to ask Barack; how are you going to pay for all that, friend?

KING: All right. Viveca, do we have a conclusion from FactCheck.org?

NOVAK: Yes. The taxes that Obama is going to raise are on people, couples, families making more than 250,000 dollars a year. He is not going to raise capital gains taxes on you unless you're making that much. And taxes on home heating oil and electricity, he is not going to raise those for anyone. KING: OK. We have another one here. Obama's trying to appeal to Hispanic voters. We'll show you an ad here with the Spanish language ad, which paints McCain as anti-immigrant. It puts up quotes from, of all people, Rush Limbaugh. Why Republicans think that is over the line, why, Bay?

BUCHANAN: Boy, the ad is -- it's crazy. First of all, John McCain is well-known in the Senate as somebody that's championed and actually sponsored, written immigration reform. That's the comprehensive. Those of us who believe in much more restrictive policies have fought him. He is a champion on the side of illegal immigrants, much more so than I'd like to tell you. Barack knows that. This is a complete, absolute distortion of the facts.

KING: Isn't that true, Ed?

SCHULTZ: No, it is not true. The fact is, as you can see it in his campaign right now, John McCain is doing nothing to get minorities to vote for him. What is he doing? He's given up on the African- American vote in this country. Absolutely doing nothing. The immigration bill is so screwed up right now, we don't know where we are as a country. But we know this: John McCain does not protect American jobs and he is anti-union and he is anti-middle class. He has nothing on the table that's going to make things better for the middle class. It will be more of the same.

BUCHANAN: So absurd.

KING: Comment, Bay?

BUCHANAN: Yes, I sure do. He didn't answer the question at all. There's no question that -- you know, you book at black America. They're obviously extraordinarily proud to have a possibility of the first African-American president here and they're championing that effort. So for Ed to suggest that somehow John McCain should somehow pander to that group is ridiculous. What he is offering --

SCHULTZ: It is not pandering.

BUCHANAN: It most certainly is to go after one group over another.

SCHULTZ: You are talking as if black Americans in this country don't count. This is the problem with the Republican party right there.

BUCHANAN: Yes, Ed.

SCHULTZ: You want to put people in a box. You want to say, we don't need them over there. All we need is the top two percent crowd. And all we need is white working women and we're going to get there. You know, the other night, Bay, on this network, you said that Sarah Palin is a union member. That is absolutely false.

BUCHANAN: She was.

SCHULTZ: She's never been a union member. She's never been a union member. And you know that.

BUCHANAN: I do not know that. I thought she, indeed, was and I will double check with my friends in Alaska. But I know her husband is a steel worker.

SCHULTZ: I was in Alaska and I can tell you she's not a union member.

KING: Let me get a break, guys. We'll bring Viveca back in, as well. The truth squad is staying with us. See you after the break.

(COMMERCIAL BREAK)

KING: Back to Bay Buchanan, Viveca Novak, Ed Schultz. Here's another tape and we'll get a comment on our group on the tell the truth squad. A McCain ad has caused huge controversy. One of the ads views -- a view by the way that Joy Behar really went after McCain on "The View." It tries to link Obama to sex education for young children. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Obama's one accomplishment, legislation to teach comprehensive sex education to kindergartners. Learning about sex before learning to read? Barack Obama, wrong on education. Wrong for your family.

(END VIDEO CLIP)

KING: Viveca, is that true?

NOVAK: Well, no, on several levels. I mean, the first problem is it says Obama's one accomplishment in the area of education is this bill. Well, this was when he was in the Illinois legislature. He didn't write the bill. He wasn't even a co-sponsor of the bill. He voted for the bill in the committee and then it died.

On another level, this was a bill that was talking about age appropriate sex education. Now, that may sound terrible, but you factor in the age appropriate, the fact of parents to opt out for their children, if they wanted to, and the fact that, really, you know, what they were going to be doing with kindergartners was mostly telling them about inappropriate touching and please report this to an adult if this happens to you, that kind of thing.

KING: Bay, isn't that the kind of thing you want your child to be aware of?

BUCHANAN: Larry, of course. I would have told them myself and I did. All three of my boys I informed them and parents can do that just fine. But the key is the intent of the bill. The entire intent of the bill was about increasing sex education for kids, number of kids. Under -- it used to be sixth grade. That was the law. It changed it all the way down to kindergarten.

Number two, it mandated that it was going to teach contraception and avoidance of diseases such as AIDS. And this was specifically in there. It was minor. It was not a major -- talk about this inappropriate touch was not the thrust of this bill. It was a minor portion of the bill. He voted for it. He never mentioned that before, until after this came back and bit him.

SCHULTZ: The thing that's so offensive about the ad, Larry, is the word comprehensive. Come on. Do you really think Barack Obama wants to present comprehensive sex education to kindergarten kids? It is all about teaching kids to protect them, to make them understand and give them the tools to understand the difference between proper and improper behavior and touching. It's a protectionary measure built into our educational system.

We all know that kids today are eight years old, going on 21. They live in a different age from when we grew up. To empower educators to make sure that the kids know right from wrong, that's what this was about.

BUCHANAN: That's not what it was about.

SCHULTZ: And McCain camp also made a big mistake by going down this road. Hillary Clinton went down this road and it didn't work.

BUCHANAN: It's ridiculous. You can say what you want, Ed, but it's just not the case. Brian York, a reporter, went back and starting talking to everybody he could, who sponsored the bill, what was it about? Looked at all the material. It's very clear this age appropriate stuff was a minor detail. What they're going to teach in kindergarten is not stated in the bill and all made up. Good cover, that's all that is.

KING: Let's hear some of what Sarah Palin claims is her record. That's drawn lots of attention. Watch.

(BEGIN VIDEO CLIP)

PALIN: I championed reform to end the abuses of ear mark spending by Congress. In fact, I told Congress thanks, but no thanks on that Bridge to Nowhere.

(END VIDEO CLIP)

KING: What's the real story on that?

NOVAK: It was actually Congress that took the Bridge to Nowhere ear mark out of the bill and did so after a good bit of public embarrassment, turned up in part by Senator McCain. When the money was finally sent to Alaska, it was sent as a lump sum without an ear mark for the Bridge to Nowhere in it. At that point, she could have still built the Bridge to Nowhere, but she didn't knowing she'd be held up to national ridicule. I'm not sure exactly when she thinks she said thanks but no thanks, but that's not how we read it?

KING: Ed, do you think that ad was true?

SCHULTZ: I'll refer to Alaskans. I was in Alaska last weekend, this was a big topic at her town hall meeting. She doesn't have Alaskans convinced that she is genuine on this position. It is a severe flip-flop, not to mention she is talking about ear marks and being the protector of federal dollars. She took that money and put it in the state treasury and never turned it back to the feds.

Sarah Palin is turning out to be a train wreck for the McCain campaign. She has no experience on foreign policy. She left the city of Wasilla in debt. They actually built a hockey facility where they didn't have the legal right to do so on the land. She just isn't good on the details.

BUCHANAN: On the issue of the bridge, the key here is if you talk to leaders, Democratic leaders in Alaska, they give Sarah Palin credit, because what happened when the money came back is Congressman Young and also the senator up there, Stevens, pushed to get this done. They were very active to get this done. She's the one that said, forget it. That's who gives her credit is the Democrats up there. Like it or not, Ed, I spent more time in Alaska last month than you have.

SCHULTZ: I was there this weekend, Bay. I can tell you, you're wrong on that.

KING: Let me get a break, gang. Let me get a break. A few more things to look at. We'll come back after this.

(COMMERCIAL BREAK)

KING: Take a look at an Obama ad hitting McCain on school funding.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When they grow up, will the economy be strong enough? Barack Obama understands what it takes, make America number one in education again. John McCain doesn't understand. John McCain voted to cut education funding, against accountability standards. He even proposed abolishing the Department of Education. And John McCain's economic plan gives 200 billion more to special interests, while taking money away from public schools.

(END VIDEO CLIP)

KING: Is that true, Viveca?

NOVAK: Well, when the ad says that McCain voted to cut education funding, you'll notice that there's some fine print on there. It's a list of five votes. Only one of those votes is a vote where McCain voted to cut education funding. In another one, he voted to increase education funding, just not as much as Democrats wanted. And the others are votes against increases the Democrats wanted to make. But they weren't votes to cut education funding.

KING: Got you. So it goes on both sides. I want to touch a couple of other things. Do you agree, Bay, this Muslim thing should be put to rest? BUCHANAN: In what respect?

KING: That people are still printing that Barack Obama is Muslim.

BUCHANAN: I don't know who's still talking about it. I haven't heard it. If there's something new and fresh, let me know about it, Larry. No one on our side are talking about it. We're not talking about it, not at all.

NOVAK: In our inbox at Fact Check, we constantly get e-mails asking about this. It's definitely still a topic of conversation.

(CROSS TALK)

NOVAK: I have no idea where it's coming from, no.

BUCHANAN: It could be the fact Barack went on national television to say it is indeed true John McCain is not attacking his Muslim faith. That might have confused some people.

KING: Maybe. Ed, is this bikini photo of Sarah Palin, is that her?

SCHULTZ: I don't know. And I don't think the American people care, Larry. I think it's just good entertainment around a campaign that is going to eventually come down to the issues, where Sarah Palin doesn't have the experience to make the right decisions. She's fabricating her record, that's very clear. I think, now that the economy is front and center, all these questions about whether Barack picked the right person, I wonder if John McCain doesn't have buyer's remorse, maybe he needs Mitt Romney right now.

KING: You want to say something quickly, Bay?

BUCHANAN: It's clear John McCain made a brilliant choice. If you want to talk about experience, the more we talk about experience and Sarah Palin's experience, it's more clear that Barack Obama has done actually nothing, has absolutely done nothing with the career given him. When you look at what Sarah has done, it's remarkable in a few years that she accomplished all she did. Her being on the ticket is going to put Barack Obama on that Bridge to Nowhere, Ed.

KING: Viveca, is this a campaign, as you look at it, a lot of lies?

NOVAK: I think right now, we're in a pretty low period, about as low as I have ever seen. I think since the conventions, both candidates have come out pretty fired up. Both have been running a lot of attack ads.

KING: We'll have you back. I'm told that photo is fake.

NOVAK: It is.

KING: OK. It is. Which candidate can get us out of our financial crisis? That's tonight's quick vote. Go to CNN.com/LarryKing.com and vote. And while you're there, download our new podcast, financial expert Suze Orman. That's a podcast you cannot afford to miss.

Want to remind you about a big show next week, President Bill Clinton is my guest. We'll talk about the election, the campaigns, what to do about the economy and lots more. That's LARRY KING LIVE next Wednesday night. Right now, live, Anderson Cooper and "AC 360."